Ask Matt: Are electric utility stocks safe?

A: Nothing is safe in the world of stocks. But when it comes to stocks that are among the least dangerous, electric utilities certainly qualify.

Electric utilities are favorites among investors looking for relative stable stock prices and steady dividends. Utilities are among the classic “defensive” companies where profits tend to hold up during the bad times, since the demand for power is constant. But don’t expect these stocks to be runaway winners, either. Since they’re defensive, when investors get excited about the market and economy, utilities are often laggards.

The numbers bear this out. One way to measure stock’s riskiness is with a statistical measure called beta. When a stock has a beta of less than 1, that means it tends to rise and fall to a lesser degree than the stock market at large. A beta of less than 1 can also mean a stock tends to zig when the market zags, which is another benefit for investors looking for shelter from market downturns. All five of the most valuable U.S. electric utilities, Duke Energy (DUK), NextEra (NEE), Southern (SO), Exelon (EXC) and American Electric Power (AEP) have betas of less than 0.5, meaning they’re much less risky than the market. Adding to the safety, these five companies pay an average dividend yield of 4%.

Company

Symbol

Beta (5-year)

Dividend yield

Southern

SO

0.18

4.8%

Duke Energy

DUK

0.24

4.4%

American Elec. Power

AEP

0.4

4.0%

Exelon

EXC

0.49

3.9%

NextEra Energy

NEE

0.44

3.1%

Sources: S&P Capital IQ, USA TODAY research

USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.